A J Watson & Associates Property Valuers - Durban & Pietermaritzburg.

10/05/2017

Your property could pose a problem on your death

Even with everything in place, heirs need to know that concluding an estate can be a lengthy process.

Your home is probably the biggest financial asset you will possess, but what happens to that home when you die? It largely depends on whether you made out a will or not.

"Finalising a deceased estate is a fairly complex process, one which is made infinitely more costly and time-consuming if you die intestate (without a valid will), especially if a significant asset such as a property is involved", Bruce Swain, the managing director of Leapfrog Property Group, says.

Even if you have made a will, it may not be valid, Swain says. For a will to be legally binding, it must meet the requirements of the Wills Act, he explains. According to the act, three conditions need to be met for a will to be valid:

The writer of the will must be over the age of 16;
The will must be in writing and
Each page must be signed by the testator or testatrix (the person in whose name the will is made out). The final page must also be signed by two competent witnesses, who must be 14 years of age or older. The witnesses need to be present at the time at the signing of the will and they cannot be beneficiaries of the will.
A will should also nominate an executor of your estate. If one is not nominated, the Master of the High Court will have to appoint one. In the case of a nominated executor, a letter of executorship must be obtained from the Master.

If you have indicated who will inherit and the will is not contested, then the matter is simple, Swain says. However, if you die intestate, the assets are disposed of according to the Intestate Succession Act. The broad principles followed are:

If the testator is survived only by a spouse, the spouse inherits the intestate estate.
If the testator is survived only by descendants, they inherit the intestate estate.
If there is a combination of a spouse and descendants (children and grandchildren), they inherit the estate jointly in specific shares.
If there is no spouse or descendants, the testator's parents and/or siblings (collateral relatives) inherit the estate in specific shares.
If there are no parents or siblings, other collateral relatives inherit the estate.
It might be that a property needs to be sold to finalise outstanding debt in the estate, such as a mortgage bond, or that the heirs want to sell it, or that selling it is the only way an intestate estate can be disposed of equitably. The sale must be done through the executor, on the consent of the Master, and the written consent of all heirs has to be obtained.
Taxes, such as capital gains tax, transfer duty and estate duty, also need to be taken into consideration on the sale or transfer of a property.

"I advise homeowners to share all the documentation relating to the property with a trusted family member or appointed executor so that they know where everything is, and how to proceed. Should the property need to be sold, this will speed up the process considerably," Swain says.

"However, even with everything in place, heirs need to know that concluding an estate can be a lengthy process and that it will be some time before the executor will be able to proceed on a property sale, if needed.

"I strongly recommend that homeowners ask an attorney to draft their will, stipulating who is to inherit and appointing an executor, and to get advice as to possible estate duty, capital gains tax and the cost of finalising the estate, so that they can prepare properly - ensuring that their will is valid, their dependents are provided for, and the costs are determined, and limited where possible," Swain says.

"Each estate is unique, but there are situations where no capital-gains tax or even estate duty will apply, so it's best to consult with an attorney to do proper estate planning sooner rather than later."

Personal Finance

10/05/2017

Dealing with damage at a rental property

It's interesting how model rental property tenants often morph into nightmare tenants when they move out. Sadly, the combination of damage left to the property with unpaid utility bills and rent is often enough to completely wipe out any returns the owner might have hoped to make for the year.

PayProp CEO Louw Liebenberg says that most damage cases arise as a result of tenants leaving the property earlier than the lease-period.

In addition, in most cases, the damage is accompanied by non-payment of the last month�s rent.

"This kind of situation is the sad reality of managing a portfolio of rental properties -but the good news is that there are ways to avoid landing up in this predicament," says Liebenberg.

As the creators of DepositGuarantee, an insurance product designed in collaboration with Rand Merchant Bank Structured Insurance, PayProp has first-hand experience in decisively dealing with damage claims when tenants move out.

The product provides landlords with 2.5 times the value of the rent as cover for unpaid rent, utilities and damage, and rewards tenants who look after the property with a no-claim bonus of 40% of premiums paid under the policy.

Here are a couple pointers from PayProp when it comes to dealing with damages:

1. Selection is crucial

In 75% of cases, tenants who sign up for the DepositGuarantee leave the property in the condition they found it and meet all their financial obligations. A crucial part of this success is the stringent selection test we use to find tenants who qualify for the product: Just over 45% of tenants who apply are selected.

2. Tenants who leave early often create the most problems

Most claims result from tenants leaving the properly earlier than the agreed-upon lease termination date. Shockingly, in 56% of such cases, tenants don�t pay the last month�s rent.

Our advice when tenants signal that they want to move out early is to pay special attention to their payment patterns, and not to allow the use of deposits in lieu of paying rental.

3. One month�s deposit is not enough

On average, a non-performing tenant leaves with R6,781 in unpaid rent, R2,168 in unpaid utility bills, and R3,894 in damage to the property.

That is a total claim of R12,843 - 1.9 times the average rent. Had the landlord opted to take a damage deposit of one to one-and-a-half times the contractual rent, there would have been a problem.

By contrast, the DepositGuarantee cover in this instance is R16,952, leaving the landlord with plenty of manoeuvring space to ensure they do not suffer a loss.

4. Interim inspections are important

While most leases make explicit provision for an interim inspection, very few landlords or agents follow through on this. We find that in cases where tenants terminate their leases early, they�ve been in the property less than 9 months.

This need not come as a surprise. An interim inspection mid-way into the lease can provide the landlord with early warning signs as to how well the property is being looked after.

5. Incoming and outgoing inspections are crucial

The Rental Housing Act is clear: you cannot charge a tenant for damage if you did not do an incoming and outgoing inspection. It is done in fairness to the tenant and ensures that there are no disputes later about what was damaged before and after a tenant moved in.

Be very specific when doing inspections, and include as many photos as possible for easy reference later. It�s just as important to ensure that both parties sign the inspection - otherwise either side may argue they were never at the inspection!

PayProp Press Release

05/12/2016

Our new country offices just outside of Pietermaritzburg. Feeling blessed.

01/04/2016

How to leave property in your will

Wills must be very carefully worded to avoid misunderstandings and misinterpretation, particularly when leaving fixed property behind.

The executor of the estate, heirs to the estate and the Master of the High Court of South Africa (who must confirm the validity of the will) often have conflicting views about a will's provisions. In these instances, they look to the executor for a decisive interpretation of any contentious clauses.

Based on this interpretation, the assets in the estate are transferred to the heirs.

Although heirs may formally object to the executor's interpretation, such challenges draw out and can complicate the settlement of the estate.

We recently came across a will where the interpretation of one of the clauses relating to the bequest of a residential property caused some doubt about the true intention of the estate owner.

When it comes to property, you can assign several different rights to heirs. In our example, the executor's decision would have resulted in either a usufruct or a fideicommissum being created. A usufruct is a limited or temporary right to use and enjoy a property, but does not constitute full ownership of the property.

A fidei commissum transfers property to another person on the condition that the property be passed on to someone else at a given time.

The clause in this particular will read as follows: "My parents shall have a life right to my residential property."

This clause seems fairly straightforward and unambiguous at first. The question that comes to mind, however, is what exactly the testator meant by a "life right". Was it a limited real right to use the property or did it mean that the parents would obtain ownership of the property?

To answer such questions, three general rules and principles apply:

The "plain meaning rule" states that the contents of a will should be taken at face value, using strictly literal interpretations.

The second rule of interpretation qualifies the "plain meaning rule", stating that one must consider the testator's intention in using particular words, and not merely the meanings of the words themselves. The reason for this is that wills are often drafted by laypeople, who may not understand that particular words and phrases could have a particular technical meaning.

A third important rule is to read the word or phrase that is contentious within the context of the overall will.

Continuing with our example above, the following clause added to the confusion: "My brother shall inherit my property after my parents' death. He may, however, rent out or sell the property at their request if the money is needed for their maintenance or general wellbeing."

If the estate owner intended that a usufruct be created for her parents (without transferring ownership to them), her brother would become the legal owner of the property. He could then sell the property, but only subject to the rights of his parents' usufruct.

In the context of the will, there are two indications that this is not what the estate owner had in mind:

The wording of the will clearly states that the brother will only inherit the property after the parents' death.

The property may only be sold with the parents' consent.

This clearly points to the creation of a fideicommissum, where successive rights to the property are created as opposed to the simultaneous real rights the usufruct would create. Furthermore, there is a presumption in our law in favour of a fideicommissum over a usufruct. When drafting your will, it's important to use plain language to avoid ambiguous words and phrases so that your true intention is reflected in your will.

Limit the use of legal terminology to an absolute minimum, and only to instances in which you or your will drafter have a thorough knowledge of the practical implications and legal consequences.

For qualified, professional assistance consult a financial adviser who has specialist fiduciary expertise for guidance.

29/01/2016

Can you evict someone else's tenant?

One of the frustrating elements of communal living is noisy, unruly neighbours who refuse to respect the body corporate rules. Often, the culprits are tenants of an absent owner.

In some instances, trustees come under pressure to do something about the situation. The usual route is to speak to the owner who is then tasked with reigning in their tenant. But what happens when the tenant simply refuses to toe the line? Can the body corporate have them evicted?

The short answers is 'no', says Francois Venter, Director of Jawitz Properties, as the tenant is not contractually bound by an agreement with the body corporate - only with the owner of the property.

However, they can enforce the body corporate rules.

"The body corporate has every right to insist that all tenants comply with the body corporate rules and even has the power to levy and recover fines from the offender if this is stated in the rules."

According to Tiaan Smit, an associate at legal firm Smith Tabata Buchanan Boyes, the body corporate can also take legal action against the owner or landlord of the property if the tenant has breached a conduct rule. "They can apply for an interdict compelling the tenant to abide by the conduct rules," Smit says." If the tenant fails to comply, the body corporate can apply for an order holding him or her in contempt of court and authorising a warrant of arrest. "

But this is a fairly drastic step and sometimes the best approach is to simply be relentless in bringing the matter to the owner's attention.

In a complex in the City Bowl, an owner had bought a flat for his daughter, who turned out to be quite a handful. Her transgressions included the usual loud voices and music far into the night, and knocking on her neighbours doors at all hours to borrow everything from sugar and coffee to washing powder and fabric softener.

In addition, whenever she forgot her remote to the gate in the parking area, she simply got out of her car and forcefully took the gate off its railing so she could squeeze inside, leaving the gate that way overnight and her car parked in the street.

Worse still, she decided to run a laundry service from her flat. As it was one of two ground floor properties, she had a small garden and would string up a washing line in full view from the flats above, which was against the rules. Not to mention the fact that she constantly filled the one communal washing line so that other tenants had nowhere to dry their clothes.

"The body corporate embarked on a strategy of being a thorn in the owner's side by continuously bombarding him with complaints. Eventually, the owner sold, and moved his daughter out," Venter concludes.

Jawitz Properties Press Release.

12/01/2016

Economy will determine property market

The performance of the residential property market this year will be inextricably linked to the performance of the economy.

Given the state of household finances, consumer confidence and housing affordability, together with the likelihood of further interest rate hikes early this year, the prospects for the housing market do not look promising.

Jacques du Toit, a property analyst at Absa Home Loans, said house price growth had been on a steady downward trend since 2014 and was forecast to remain in single digits in 2016.

"Lower price growth is forecast for 2015 and 2016 compared with the previous two years, mainly as a result of trends in and the outlook for key macroeconomic and household sector related factors," he said. Du Toit added that in view of expectations for nominal house price growth and consumer price inflation, house prices were expected to remain virtually flat in real terms in 2016.

He added that factors related to the economy would continue to drive the residential property market, affecting the affordability of housing and the accessibility of and demand for mortgage finance.

John Loos, a household and property sector strategist, stressed that with the risk of recession looming ever larger, there appeared little to support average house price growth at currently positive real rates.

Loos said FNB's valuers already perceived residential demand to be slowing, but emphasised that a supply constrained market kept a reasonable market balance "for the time being".

But Loos said the renewed consumer confidence "nosedive" in December boded ill for the housing market this year.

Loos said the main components of the consumer confidence survey pointed to confidence being decimated more by what consumers were seeing, hearing or reading rather than their own actual financial situation.

However, Loos said that with leading indicators pointing to further weakening in the economy heading into 2016, the financial position of consumers should begin to weaken, which could drive an even further decline in consumer confidence.

Loos said this was likely to lead to a more cautious household sector, resulting in demand predominantly for primary residences and smaller homes to lower municipal services costs and reduce maintenance, insurance and other related costs.

He said there could also be some shifts on the supply side, adding that as the economic indicators deteriorated, the chance of a decline in new housing completions would increase this year.

There could also be some shifts in the supply side of the existing home market should the economy weaken further, with a greater portion of homeowners remaining in their existing homes to save on huge relocation and transactional costs.

"It almost goes without saying that selling in order to upgrade homes would likely decline in significance.

"But there are two sources of supply that could conceivably increase. Should the economy indeed get tougher in 2016, the one key group of sellers that could rise in prominence would be sellers selling in order to downscale due to financial pressure, and a significant portion of these would 'rent down' as opposed to 'buying down'.

"The second source of selling that could increase could be selling in order to emigrate. One gets the impression that the 2015 consumer confidence dip may be driven in part by concerns regarding the longer term economic future of South Africa, and that could enhance the skills drain once more.

"The magnitude of such a rise may be contained by the fact that the global economy is not booming, so employment prospects in many of the popular emigration destinations may remain limited," he said. Loos concluded that there was little that pointed to a better economic performance in 2016 and together with the expectation of further gradual interest rate hiking in the year, the residential market was expected to show some form of slowing.

He said the FNB house price index looked set to slow to an average of 6 percent in 2015 from 7.1 percent in 2014 and was expected to slow still further this year.

Andrew Golding, the chief executive of the Pam Golding Property Group, said growth in house prices last year continued to outstrip inflation, despite a slowing of sales volumes across the total market.

He said this was indicative of the continued strong demand for homes to rent and to buy, which exceeded supply, particularly in the major metropolitan areas of the country. He said these trends were expected to continue this year against the backdrop of an economic environment that was likely to remain sluggish, with an anticipated economic growth rate of close to 1.5 percent and the possibility of interest rates inching higher during the first half of the year.

"As densification in major metro areas continues, with housing demand increasingly focused around public transport infrastructure, homeowners are likely to be willing to sacrifice space for the convenience of location, further underpinning demand for sectional title properties," he said.

22/12/2015

Repair, renovate or improve a property before selling?

When putting a home on the market, sellers of property should disclose all defects to their agents, and they should insist that agents in turn list these on the defects list that is usually attached to the sales mandate on the property.

Full disclosure will protect the seller from any claims on faults that may be found in the home later.

It often happens, on going through a defects list, that the seller will contemplate repairing items that are in a state of disrepair or improving certain aspects of the home in order to improve its marketability, said Laurence van Blerck, a Knight Frank South Africa agent.

It is important to distinguish between marketability and value however, he said. Marketability refers to the desirability of the property from the buyers' perspective and value is its likely selling price, taking into account the accommodation on offer, the area and its amenities whilst bearing in mind the supply and demand for similar properties on the market. Some repairs and renovations will improve a propertys marketability without resulting in a significant increase in its value.'

The question that will be asked is what the amount should be that will be put towards repairs or renovations.

"It is very difficult to pinpoint what each person should spend on a home before they sell because values would be unique to each situation, he said."

But, in many cases, simple items such as repairing a broken window or doorframe, plastering superficial cracks in walls, painting the home or replacing a worn carpet could be the difference between a buyer considering purchasing the property or leaving it to continue looking.

Many say that kitchens and bathrooms sell homes, and sellers may have the idea to renovate or upgrade these before putting the home on the market. Caution, however, should be applied in the money spent here as these rooms are known to be expensive to upgrade, and if the potential buyer does not like the new fittings he might well end up removing all the new items that have been installed, which would be a waste of money, said van Blerck.

Decoration in a home is subjective and what one person might see as a "dream kitchen might not be to someone else's taste. There is, too, the risk of over-capitalisation, as too much money spent on big-ticket items can be difficult to recoup when putting a home on the market."

"I would advise anyone contemplating renovating, do not do so because you're selling but rather because youd like to have a new kitchen or bathroom. If it is solely for the purpose of making the home more marketable, then use some of the more cost effective ways of sprucing the home up, such as fresh paint in a neutral colour, a professional carpet clean, sanding worn wooden floors and a revarnish or changing cupboard door handles to more modern types. Some light fittings are easily replaceable with cost effective ones and need not be expensive designer types but rather just more contemporary ones, said van Blerck."'

The crucial thing to remember, when selling a home, is that neat and tidy properties with light and bright rooms tend to be more marketable than dark, cluttered ones and if a little money and time is spent on a home, it might be worth the effort to get the asking price or perhaps even a little more, he said.

Knight Frank South Africa Press Release.

12/11/2015

http://www.sapv.co.za/things-to-consider-when-objecting-to-municipal-valuations/

The Municipal Property Rates Act (MPRA) stipulates that all properties in each municipal district need to be valued every four years. Mass appraisal techniques based on comparable sales are necessa…

02/11/2015

Seller knew of property defects, court rules

A voetstoots clause in a property sale agreement was not enough to protect the seller of a smart Garden Route cottage when the new owners moved in and began uncovering problems which they were not warned about before they bought.

Edward and Lisa Ellis turned to the Western Cape High Court where it emerged that the sale agreement between them and Catherine Cilliers contained a clause that read: "The property is sold as it now stands (ie, voetstoots) and according to the deed(s) of transfer and diagram(s). The seller shall not be liable for any deficiency in the extent of the property nor shall he benefit from any excess.

"Neither the seller nor his agent shall be responsible for any defects, whether latent or patent, nor shall they be answerable for any warranties either express or implied."

The Ellises took the matter to court, asking it to rule on the merits of the case and not decide on the relief that they should be granted.

In other words, the issues to be decided on included whether defects they had uncovered at the house were indeed defects, whether these had been concealed and whether the voetstoots clause protected Cilliers.

The court found that Cilliers should have told the Ellises about the problems at the house and Acting Judge Allie Blommaert ruled in favour of the Ellises with costs.

The saga dates back to March 2011 when, after transfer of the property was finally effected, the Ellises started renovations at the house.

It was constructed in such a way that the back of the house was built into a slip and the front on so-called stilts. The couple wanted to make the lounge, kitchen and dining area open-plan and started their renovations by removing kitchen cupboards. They noticed that two sections of the floor had been cut out and later replaced to create access to the area underneath the floor.

In addition, the floor had subsided at its outer edges.

They consulted an expert and, after the floorboards were removed, discovered that the house suffered from a number of defects.

This included severe decay of poles supporting the structure of the timber house, the beams and floor joists. The house was not level. A cement screed over the timber flooring had the effect of concealing the subsidence of the south-west corner of the house and a false ceiling had been constructed under the original ceiling in order to create the illusion that the house was level.

Cladding was added to the outside of the house to conceal the subsidence and wooden wedges were used to raise the lounge floor, which again had the effect of concealing the subsidence of that section of the house.

Cilliers, however, denied knowledge of the defects relating to the foundation.

She admitted that the cement screed was applied 10 years before in order to level the floor, and that a false ceiling had been installed.

However, she claimed it was done for aesthetic reasons and did not constitute a defect.

The cladding was done to save on painting every three years, she claimed.

In a recent judgment, Acting Judge Blommaert said it was trite that, to avoid the consequences of a "voetstoots" clause, the purchaser must show that the seller knew of the latent defect and did not disclose it, and that he or she deliberately concealed it with the intention to defraud.

He said that, from the evidence, two things were patently obvious - the foundation was severely decayed and "certain remedial work" had been done to the house.

Cilliers said she was unaware of the state of the foundation and that the remedial work was done for aesthetic and practical reasons.

She, therefore, did not have an intention to defraud, she submitted, saying she was protected by the "voetstoots" clause.

Acting Judge Blommaert said, however, it was clear to him that Cilliers never considered the significance of telling the couple that the floors were not level and that her late husband fixed it by laying carpets over some areas and tiling on top of a cement screed poured over wooden floors in other areas.

"In my view her actions constituted the necessary intention to defeat the provisions of the voetstoots clause. Even if (she) did not think uneven floors were a defect... it was such an unusual feature that she should have revealed it.

"It certainly was a most unusual feature which made renovation of the house exceptionally difficult. That plaintiffs had an interest in knowing about the cement screed on the floors and the false ceilings, seems to me to be obvious."

16/10/2015

Cancelling an offer to purchase can have serious consequences

Sometimes property deals are hampered by buyers or sellers refusing to perform their contractual obligations.

In such instances, the process of establishing what the Law of Contract is can be a vast, complex one, says Shan Hulbert of Knight Frank Residential SA.

Some examples of such repudiation could be :

denial of the existence of the contract;
contesting the terms of the contract;
refusal to perform to the contract;
planning to rescind the contract when rescission is not justified;
notification by one of the parties that he or she cannot perform;
or refusal to perform in full.
It can happen that, after the agent spends much time on marketing the property and on counselling the sellers on correct pricing, and then concluding a sale with the purchaser for more than they originally offered, the seller refuses to sign the transfer documents or the purchaser does not produce the necessary guarantees.

An offer to purchase a property is governed by the Law of Contract and courts will tend to honour the spirit of the contract, said Hulbert. In most cases the law will be against those who cancel without a legal reason to do so. Where the problem lies, she said, is the time and costs involved when someone does go against their contract and wants to opt out.

What has to be established, she said, is whether there is any remedy in terms of the contract and how this will affect the parties concerned. The person who is in breach is said to be 'in mora' - 'in delay or in default' - and legal action can follow but this will inevitably be expensive and time consuming as courts are often backlogged and lawyer fees will add up to significant amounts, said Hulbert.

"Ultimately the risk of repudiation should be avoided by ensuring that diligence is practiced throughout the sales process. The signing of the contract is the crux of a transaction and proper education of all the parties concerned is crucial," she said.

The best way to avoid any complication is by being vigilant in drawing up and concluding the contract, educating everyone on the nature and importance of their contract and securing a deposit from the buyer which acts as security, concluded Hulbert.

Knight Frank Press Release.